The Long-Run Aggregate Supply Curve Is Vertical If

question 13

Multiple Choice

The long-run aggregate supply curve is vertical if

• A) wages and other costs fully adjust to changes in prices in the long-run.
• B) the government follows optimal fiscal policy.
• C) technology is fixed.
• D) the Fed follows optimal monetary policy.

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Definitions:

Variable

A characteristic, number, or quantity that increases or decreases over time, or takes different values in different situations.

Fixed

Costs or expenses that do not change with the level of production or sales activity, such as rent or salaries.

Committed Fixed Costs

Investments in facilities, equipment, and basic organizational structure that can’t be significantly reduced even for short periods of time without making fundamental changes.

Short Term

A time period typically lasting less than one year, used to evaluate financial performance, investments, and objectives that are expected to be achieved within a brief timeframe.